The Riksbank can grant both intraday and overnight credit, and also uses other monetary policy instruments that entail risks corresponding to those for granting credit. To limit these risks, the Riksbank, like most other central banks and in accordance with the Sveriges Riksbank Act, applies the principle that adequate collateral shall be pledged for all such exposures.
The collateral is mainly comprised of different types of security, but in special cases foreign currency may also be used as collateral.
Eligible securities must be issued by a government, central bank, local authority or other public body, or company with a satisfactory credit rating. A further requirement is that the state in which the issuer is domiciled is approved by the Riksbank. The securities must also be issued in a currency approved by the Riksbank. The Riksbank's requirements regarding credit ratings are stated in the Instructions for Collateral, which also contain information on eligible countries and currencies.
There are special limits for securities issued by credit institutions. These securities are only eligible if covered or guaranteed by a central government or local government.
Securities issued by the counterparty or a company with close links to the counterparty are not accepted.
There are special limit rules for covered bonds. Further information on the rules regarding limits can be found in the Instructions for Collateral.
For securities to be used as collateral requires an arrangement established for this purpose that the Riksbank deems to be sufficiently secure. This means that it is not always possible in practice to use all of the securities that meet the Riksbank's requirements.
The Riksbank, together with the Danish and Norwegian central banks, has developed an automatic system for using liquidity in one of the central banks, in the form of a credit balance in an account at the central bank, as collateral for intraday credit in one of the other central banks. This system is called the Scandinavian Cash Pool. In addition to holdings of Danish and Norwegian currencies within the framework of the Scandinavian Cash Pool, the Riksbank also accepts holdings in euro, which are paid into the Riksbank via the Deutsche Bundesbank. A special agreement with the Riksbank is required to use foreign currency as collateral, and a special one-off charge is made for this.
The Riksbank has largely automated the management of collateral, which means that RIX participants can obtain rapid access to increased credit in RIX by registering a transfer of securities in Euroclear Sweden or Euroclear Bank or by paying foreign currency into an account. RIX participants can also receive information through RIX on what collateral has been pledged.
With regard to the valuation of collateral, the Riksbank makes a haircut. Normally, the size of the haircut depends on the type of security. Different types of security are placed into one of three liquidity categories. An extra haircut may be made if the valuation prices the Riksbank has access to are not up-to-date. The linked document Annex S2 Eligible assets reports the current haircut including possible extra haircut.
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